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Strong festive demand for besan and chana dal to support NCDEX Chana futures

Chana arrivals in the local mandi and has been reportedly lower in the rural and semi urban regions; which is also expected to support upside movement in the spot and future prices in the coming weeks.

September 03, 2020 / 08:37 AM IST

Chana commonly known as 'Desi Chana' is a Rabi Pulse sown/grown in the winter season during the months of October to December. The Major states constitute Madhya Pradesh, Rajasthan and Uttar Pradesh and the usual newcrop harvesting period happens from February to April months of every year. Sowing of Chana depends on the winter weather conditions during the said period. Cooler temperatures with good amounts of water content in the soil improves the yield for sowing and eventually increases the production during the harvest period.

Price also plays a critical role that would determine how much sowing the farmers are ready to do in the above period. Higher prices generally forecasted to increase sowing of Chana while lower prices can possibly lead to crop switching to other crops such as Mustard, Wheat and Maize Rabi in the earlier mentioned states respectively. The constituents of gram reported by the Government of India includes 80-85 percent of Desi chana and rest 15-20 percent chickpeas or Chole. Other states that grow desi chana are Gujarat, Karnataka, Haryana and Maharashtra.

NCDEX Chana Future prices have been trading bullish during the month of August, closing at Rs 4,685 per quintal by August 27. It is higher by 14.32 percent compared to Rs 4,098 per quintal reported on August 31. Lower supplies and increased festive demand in the domestic markets brought long accumulation in NCDEX Chana futures. Moreover, NCDEX Chana prices also started to witness uptrend as NAFED continued to procure high amounts of Chana after the government of India had declared Rs 1 lakh stimulus package for the agriculture sector.

Fundamentally for the month ahead, NCDEX Chana futures is estimated to remain bullish due to higher buying in the domestic markets and higher carry forward stocks from last year (2019-20). In the easing lockdown scenario, the demand continues to remain strong as market traders have their main focus on the festive demand and exports of both kharif and rabi commodities. Monsoon and yield reports of Kharif crops plays a critical role as well in determining the movement of the agricultural commodities. It will eventually be the key to determine the sowing of the rabi crops during the later winter season. However, reports of kharif crop damage in Central India has added worries and has recently driven up the prices of almost all agricultural commodities.

Moreover, Chana arrivals in the local mandi and has been reportedly lower in the rural and semi urban regions; which is also expected to support upside movement in the spot and future prices in the coming weeks. NAFED continues to buy Chana from MSP levels of Rs 4,875 per quintal from the major states of Madhya Pradesh, Rajasthan and Uttar Pradesh. Also, we can expect festive buying of Chana Dal and Basan to continue and can limit any major downtrend in prices. Only key factor to watch out for during the coming weeks is that Chana spot and future prices may not sustain above the MSP levels for long, as farmers could immediately start pumping supplies in the local market and can bring big corrections in prices. Overall, we expect a bullish trend in NCDEX Chana Futures for the month ahead and prices are expected to move towards Rs 5,200 per quintal.

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The author is Executive Director at Choice Broking.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sumeet Bagadia is an Executive Director at Choice Broking. He is a technical analyst and gives view on equities, commodities and currencies. Earlier he was the head of Commodities & Currencies Research at Destimoney Securities Pvt. Ltd; AVP - Commodities & Currency at CD Equisearch Pvt Ltd; Senior manager at Commodities & Currency at CD Equisearch Pvt Ltd; Regional advisor at Commodities & Currency at Sharekhan.
first published: Sep 3, 2020 08:37 am

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